Colonial Rule and Indian Business
Formation
• The East India Company was officially formed on December 31,
1600, through a royal charter granted by Queen Elizabeth I of
England. The charter authorized the Company to engage in
trade with the East Indies, which encompassed regions such as
present-day India, Indonesia, China, and Japan.
Early Trading Activities:
1. The East India Company began trading with India in the early 17th
century, establishing its first factory in the town of Surat in 1608.
2. Over the years, the company expanded its presence in various parts of
India, establishing trading posts and forts along the coast.
Battle of Plassey (1757):
• One of the pivotal moments in the establishment of British rule
was the Battle of Plassey in 1757.
• The East India Company, led by Robert Clive, defeated the
Nawab of Bengal, Siraj-ud-Daulah, with the help of political
maneuvering and betrayal within the local nobility.
• This victory gave the company control over Bengal, a wealthy
and populous region, providing a strong economic base.
Battle of Buxar (1764):
• The Battle of Buxar solidified British control over northern India.
• The East India Company, along with its allies, defeated the
combined forces of the Mughal emperor Shah Alam II, the
Nawab of Oudh, and the Nawab of Bengal.
• This victory led to the signing of the Treaty of Allahabad in 1765,
granting the East India Company the Diwani rights (right to
collect revenue) in Bengal, Bihar, and Orissa.
Expansion and Consolidation:
• With the acquisition of territories and revenue rights, the East
India Company continued to expand its influence in India.
• The company established a system of indirect rule, allowing
local rulers to govern under the company's supervision.
Doctrine of Lapse:
1. The Doctrine of Lapse was a policy introduced by Lord
Dalhousie, the Governor-General of India, in the mid-19th
century.
2. According to this policy, if an Indian ruler died without a
natural heir, the territory would lapse to the British East India
Company.
3. This policy led to the annexation of several princely states,
further extending British control.
1857 Sepoy Mutiny (Indian Rebellion
of 1857):
• The widespread discontent among Indian soldiers (sepoys) and
civilians culminated in the Sepoy Mutiny against British rule in
1857.
• The rebellion was brutally suppressed by the British, and in
1858, the British Crown assumed direct control over India from
the East India Company.
Formation of the British Raj:
• Following the Indian Rebellion of 1857, the British government
took over the administration of India, and the British Raj was
officially established.
• India remained under British rule until gaining independence in
1947.
Impact of colonial policies on Indian
businesses
1. Economic Exploitation:
1. The primary aim of British colonial policies in India was economic
exploitation. The East India Company, and later the British Crown,
sought to extract maximum economic benefits from the subcontinent.
2. Indian resources, including textiles, spices, indigo, and opium, were
exploited for export to Britain and other colonies.
2. Deindustrialization:
1. British policies led to the decline and deindustrialization of traditional
Indian industries, such as textiles, handicrafts, and metalwork.
2. The imposition of high tariffs, discriminatory trade practices, and the
influx of cheap British manufactured goods undermined the
competitiveness of Indian products, leading to the collapse of many
indigenous industries.
3) Land Revenue System:
1. The British introduced the Permanent Settlement (also known as the
Zamindari system) and later the Ryotwari system, which significantly
impacted agrarian practices.
2. The emphasis on revenue collection often led to the exploitation of Indian
farmers, and the focus on cash crops for export sometimes took
precedence over food crops, affecting local economies.
4) Railways and Infrastructure Development:
3. The British invested in the construction of railways, roads, and ports,
primarily to facilitate the transportation of raw materials and finished
goods for export.
4. While this infrastructure development had some positive impacts on
trade, it was primarily geared toward serving British economic interests.
5) Limited Industrial Development:
1. British colonial policies were not geared towards fostering
industrialization in India. Instead, they aimed at maintaining India as a
supplier of raw materials and a market for British manufactured goods.
2. The few industries that did develop were often under British control, and
Indian entrepreneurs faced significant obstacles in establishing and
expanding businesses.
6) Educational Policies:
3. The British introduced an education system that primarily served the
needs of the colonial administration and aimed to produce a class of
Indians loyal to British rule.
4. While some Indians did benefit from education, the overall impact on
business was mixed, as the focus on traditional and vocational education
was limited.
7) Discriminatory Trade Practices:
1. British policies favored British manufacturers over Indian industries.
Protective tariffs and trade regulations were often designed to benefit British
goods at the expense of Indian products.
2. Indian businesses faced discrimination in international trade, limiting their
access to global markets.
8) Creation of a Bureaucratic Class:
3. The British colonial administration created a bureaucratic class that often
served British interests. The administrative structure was hierarchical, and
opportunities for Indians to participate in decision-making were limited.
9) Impact on Banking and Finance:
1. The British established a centralized banking system, but it was
mainly designed to serve colonial interests. Indian businesses
often faced challenges in accessing credit and financial services.
10) Legacy of Economic Inequality:
2. The economic policies of the British colonial period contributed to
the creation of economic disparities and social inequalities that
continue to have repercussions in modern India.
